On Thu, 2023-07-13 at 10:25 -0400, Michael or Penny Novack wrote: > On 7/12/2023 8:18 PM, Default User wrote: > > On Wed, 2023-07-12 at 16:38 -0400, Michael or Penny Novack wrote: > > > On 7/11/2023 6:48 PM, Default User wrote: > > > > This is a case of not knowing the history (how bookkeeping changed > over > ~thousand year history) and never having kept books pen and ink on > paper > in modern bookkeeping (the last couple hundred years) > > > I will freely admit that I do not fully understand the formal > > definitions and usage of income and expense accounts. Indeed, I am > > not > > an accountant, or even a bookkeeper. But I do think I know enough > > to > > understand how closing the books includes transferring income and > > equity balances (or at least "income - expenses") to equity. > > The PROCESS of :close the books" in the old days of pen and ink on > paper > (how I learned) not only ended up with all income and expense > accounts > closed to equity but also produced the "Profit&Loss" report (aka > "Income > Statement, aka "Statement of Revenues and Expenses", etc.). The > income > and expense accounts were closed to equity INDIRECTLY. Only their net > was actually transferred to equity. > > There was ANOTHER temporary account of fundamental type equity called > "Profit and Loss". The income and expense accounts were closed to > this > account and then it closed by whatever amount would bring it into > balance. That would be labeled "net gain" or "net loss" depending on > what side it was on and the other side of that entry would be equity. > > > > So, "retained earnings" of "retained losses" would not be actual > > accounts, with actual transactions, but instead just calculated > > sums > > that appear in a Balance Sheet report? > Yes, but now you see where would be coming from, an entry in the > "P&L" > account (once was a real, if temporary account under equity). In > other > words, perhaps confused by temporary accounts once used in a process > but > that were zero balance before and after. The Balance Sheet report > assumes the books are closed when it is run << income and expense > accounts do not appear --- only their NET >> > > > > Perhaps that is similar to how I have always thought of equity - > > not as > > an actual account, but (very simplified, of course) the result of > > the > > calculated result of Assets - Liabilities. "Take what you own, > > subtract > > what you owe. What's left is your net worth (equity)". > > NOT a good idea to think that way because you are thinking only of > the > very special case of "sole". Equity is the ENTITY'S net wort, not > necessarily yours, and you had best think of real accounts as would > be > containing important information for joint ventures, partnerships, > co-operatives, corporations, etc. > > Michael D Novack > > > _______________________________________________ > gnucash-user mailing list > [email protected] > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All.
Hi, Miichael! Thanks for the background information. Regarding: "Equity is the ENTITY'S net wort, not necessarily yours, and you had best think of real accounts as would be containing important information for joint ventures, partnerships, co-operatives, corporations, etc." Thankfully, I do not have to account for the finances of any of the above mentioned entities. I am just trying to keep track of my own finances, so I guess you could say that I am a "sole proprietor". Since I am not running or participating in a business, except for investments, I am spared most of the complexity. But I do want to know a little about accounting, so that I don't have to just give an accountant a load of boxes full of various financial papers, and say "You figure it out". a) That would be rude. b) The less I can explain to said accountant, the more likely that said accountant might have have to just resort to "best effort". c) The bill would make my eyes water! : ) For now I will just have to always keep in the back of my mind that: 1) Gnucash account ledgers should be thought of as primarily just a place to enter and edit actual transactions. 2) The Equity account should normally be considered to consist of Assets - Liabilities, (including opening balances, in Equity:Opening Balances), but not including (Income - Expenses), unless there have been no transactions affecting Income or Expense accounts since either the date the books were originally created or the most recent date the books were closed. I think! (Sorry for the run-on sentence!) 3) If I want a current "real" equity amount, I will just create a Balance Sheet Report. Have a good day! _______________________________________________ gnucash-user mailing list [email protected] To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
